The FED is increasing fees that it collects from banks to cover costs of taking over failing banks.

The increases have become so larger that many small to medium sized banks are having to pay all of their margin to the government. Without growth in capital these banks can’t loan and without growth in loans these banks will start to move towards insolvency. Without these banks many businesses, especially small businesses will have to lay off employees or shut down entirely. S&P 1100 possible if hope and change speculation gets the better of fundamentals, but S&P will have a hard time staying there.

There are some possibilities that could push the S&P up too or over 1100. One of the most likely causes would be foreign bank interest rates rising while US interests rates are kept at current level. Weakens the dollar which would then strengthen stock market. Bond yields will become more attractive and some of the upward momentum may be contained.

Eventually though, if the dollar drops enough, stocks would prevail over bonds and move higher. Then once everything looks like a full recovery is in place US interest rates will start to climb. Dollar will strengthen and interest rate cost will slow down if not stop the rise in stocks. Dollar strength will be counterbalanced by continued increases in Federal deficit and divestment of dollars as a reserve currency.

This is a possible scenario based upon past occurrences and will likely take place over a two to three year time frame.

optimistmiser

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• If money is moving OUT of equities, and the market goes UP……….hmmmmm
• A Depression Never Ends (1929-2009)

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